Digitization and COVID-19: A Perspective On Independent Financial Advisers

While face-to-face communication has its advantages, remote, digital solutions are equally viable

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By George Mitra


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The year 2020 is of extreme uncertainty for us all. With the COVID-19 pandemic in full swing and social isolation being enforced globally, businesses across sectors are facing unprecedented challenges. The pandemic has hit businesses that rely on people to people communication particularly hard. For independent financial advisers (IFAs), many of whom are used to meeting clients in-person to nurture strong relationships, social isolation raises some unique challenges: How do you maintain and strengthen intimate, long-term client relationships in a time of forced distancing?

Strong, reliable client communication is essential to success in the IFA sector. While face-to-face communication has its advantages, remote, digital solutions are equally viable. And in the current global situation, they are no longer optional.

To have a better understanding of how IFAs are coping with the crisis, it makes sense to look at the state of digitization in the IFA industry.

A Fragmented Market with Limited Digital Penetration

India's financial advisory market is large. Over 71 per cent of Indians investors rely on financial advisors. While the organized financial advisory sector has an extensive presence in tier I cities, catering to high networth individuals (HNIs) and ultra HNIs, the majority of investors get their advice from the over 200,000 registered IFAs spread across the country.

Moreover, digital penetration remains very low. This has a significant impact on "who' Indian investors get there financial advice from and how. For instance, pure-play digital B2C solutions, where customers get financial advice through self-service, have very low adoption rates. The country's top five pure-play digital advice solutions each have less than one percent market penetration.

Why Haven't Digital Solutions Succeeded so Far?

At 71 per cent, the proportion of Indian investors dependent on third-party financial advice is significantly higher than the global average of 54 per cent. This implies that information asymmetry plays a much bigger role in the average Indian investor's experience: financial advisors are seen as trusted entities with an awareness of risks and opportunities that exceeds that of the investor.

In this situation, trust is a matter of paramount importance. IFAs act as a bridge of trust, connecting Indian investors to investment opportunities. One of the key reasons pure play solutions haven't worked out is that there is no trusted intermediary between the investor and the digital platform. In the Indian context, an IFA's role in maintaining customer relationships cannot be replaced. But what role does digitization play, then? We require digital solutions that empower IFAs to scale their client bases and to offer a better quality of service are the answer.

The Need of the Hour: A Trusted Digital Platform for IFAs

The COVID-19 epidemic has disrupted the conventional, face-to-face relationship between IFAs and their clients. What the advisory market needs right now is a trusted platform connecting IFAs and their clients. By retaining the IFA as a key bridge, and without erasing IFA brand identities and plugging the communications gap that COVID-19 has created, without compromising on the trust-based relationship between IFAs and clients. And by digitally addressing mid and back-office needs such as customer relations, reconciliation, and execution, these platforms enable IFAs to succeed and even expand their businesses in the present work-from-home environment.

In Uncertain Times, Digital is The Way Forward for IFAs

During the period of national lockdown, the relative lack of digitization has become a major challenge for India's 200,000 unorganized IFAs and their clientele. Digitization on a war footing is the only immediate answer. The most viable solution here is to leverage digital platforms that put the IFA-client relationship front and center.

George Mitra

Co-founder and CEO, Fintso

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